Peru Commission to Address Dispute Over Pluspetrol Block

LIMA Oct 11, 2006 (Dow Jones Newswires)

A multi-sector commission will meet in an indigenous community in northern Peru Wednesday in a bid to resolve an impasse between native communities and Pluspetrol SA's Pluspetrol Norte SA, a Pluspetrol official said Wednesday.

Late Tuesday, the company suspended operations in three production units in Block 1-AB in northern Peru due to safety concerns involving possible protests by an indigenous group.

According to Pluspetrol official Daniel Guerra, the three units were temporarily shut down when Pluspetrol Norte received information that the Federation of Native Communities of Rio Corrientes, or Feconaco, planned to take over some of the installations.

"We decided to suspend pumping and shut off the electricity. We did not want someone to accidentally electrocute themselves," he said.

Guerra said that Feconaco representatives did hike into the area and discovered that the units were shut down.

"There was no confrontation and the head of Feconaco has agreed to a dialogue," said Guerra.

The dispute centers on water.

For several decades different companies operating the block dumped water used to produce oil back into the river system, leading to environmental contamination.

Pluspetrol Norte is in the process of reinjecting the water into wells that are 3,000 to 3,500 meters deep, said Guerra.

"Our goal is to reinject 100% of the water within two to three years," he said.

According to Guerra, a multi-sector commission with representatives from the indigenous communities, local and regional governments and the ministry of health and energy and mines will meet in an indigenous community Wednesday.

Pluspetrol Norte officials will participate as invited guests, he said.

"We are hopeful that this situation will be resolved today," he said.

He said that there are several points on the agenda, including health and education issues and underscored that one of the problems is that Pluspetrol Norte is paying millions of dollars in royalties for oil produced in the block but that indigenous communities are not receiving the funds.

Pluspetrol Norte produced 28,027 b/d of oil in September for a total of 840,817 barrels from Block 1-AB.

Guerra did not specify what percentage of oil produced in the block comes from the three units.

The China National Petroleum Corp, or CNPC, has a 45% stake in Pluspetrol Norte, according to the Peruvian regulatory agency.

Copyright (c) 2006 Dow Jones & Company, Inc.